-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GFgbFZuNURBlnVPSrfMssIGauSAMrIfslOHWBal4O4quFI6/NSCgL9OsZHbQBUH2 BmJpBx75ezQQvu4jy26EAg== 0000897101-97-001167.txt : 19971113 0000897101-97-001167.hdr.sgml : 19971113 ACCESSION NUMBER: 0000897101-97-001167 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TSI INC /MN/ CENTRAL INDEX KEY: 0000100063 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 410843524 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02958 FILM NUMBER: 97715943 BUSINESS ADDRESS: STREET 1: 500 CARDIGAN ROAD CITY: SHOREVIEW STATE: MN ZIP: 55126 BUSINESS PHONE: 6124830900 MAIL ADDRESS: STREET 1: 500 CARDIGAN ROAD STREET 2: D CITY: ST PAUL STATE: MN ZIP: 55126-3996 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 10549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1997. Commission File Number 0-2958 TSI INCORPORATED (Exact name of registrant as specified in its charter) Minnesota 41-0843524 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 500 Cardigan Road, Shoreview, Minnesota 55126 (Address of principal executive offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 20 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Date: November 5, 1997 Number of Common Shares Outstanding: 11,645,437 TSI INCORPORATED FORM 10-Q For the Quarter Ended September 30, 1997 Page PART I. FINANCIAL INFORMATION 2 Item 1. Financial Statements Consolidated Statements of Earnings 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7-9 PART II. OTHER INFORMATION 10 EXHIBIT 11 Computation of Per Share Earnings CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------ ------------------------ 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net sales $20,685,942 $19,314,726 $39,976,109 $38,811,844 Cost of products sold 9,015,870 8,474,322 17,703,420 16,987,911 - ----------------------------------------------------------------- ----------- ----------- ----------- ----------- GROSS PROFIT 11,670,072 10,840,404 22,272,689 21,823,933 Operating expenses Research and product development 2,928,737 2,787,799 5,713,101 5,277,786 Selling 4,555,205 4,197,664 8,901,981 8,461,051 Administrative 1,652,897 1,486,520 3,139,978 2,900,937 - ----------------------------------------------------------------- ----------- ----------- ----------- ----------- 9,136,839 8,471,983 17,755,060 16,639,774 - ----------------------------------------------------------------- ----------- ----------- ----------- ----------- OPERATING INCOME 2,533,233 2,368,421 4,517,629 5,184,159 Other income 190,383 107,879 486,241 173,087 - ----------------------------------------------------------------- ----------- ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES 2,723,616 2,476,300 5,003,870 5,357,246 Provision for income taxes 953,000 867,000 1,751,000 1,875,000 - ----------------------------------------------------------------- ----------- ----------- ----------- ----------- NET EARNINGS $ 1,770,616 $ 1,609,300 $ 3,252,870 $ 3,482,246 =========== =========== =========== =========== EARNINGS PER COMMON SHARE $.15 $.14 $.28 $.30 - ----------------------------------------------------------------- =========== =========== =========== =========== Weighted average number of shares for computation of earnings per common share 11,803,907 11,806,557 11,797,325 11,673,955
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS (Unaudited)
SEPT. 30 March 31 Sept. 30 1997 1997 1996 (UNAUDITED) (unaudited) - ---------------------------------------------------------------------- ----------- ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,329,414 $ 7,694,998 $ 4,761,585 Accounts receivable 13,934,968 14,256,692 12,181,593 Prepaid expenses 477,624 310,276 559,830 Inventories Finished products 2,535,567 2,908,537 2,817,891 Work-in-process 3,252,865 2,486,856 2,500,940 Materials and supplies 8,879,513 7,906,912 7,067,545 - ---------------------------------------------------------------------- ----------- ----------- ----------- 14,667,945 13,302,305 12,386,376 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL CURRENT ASSETS 36,409,951 35,564,271 29,889,384 INTANGIBLES AND OTHER ASSETS Goodwill 3,819,011 3,001,796 2,801,257 Note receivable 734,255 595,577 610,000 Deferred income tax benefit 668,815 498,020 721,020 Other assets 3,307,758 2,420,050 2,231,990 - ---------------------------------------------------------------------- ----------- ----------- ----------- 8,529,839 6,515,443 6,364,267 PROPERTY, PLANT AND EQUIPMENT Land 128,503 128,503 128,503 Buildings 3,586,992 3,586,992 3,564,863 Construction in progress 160,354 183,229 567,325 Machinery and equipment 19,718,473 18,244,708 17,301,013 - ---------------------------------------------------------------------- ----------- ----------- ----------- 23,594,322 22,143,432 21,561,704 Less allowance for depreciation 14,620,088 13,344,806 12,696,454 - ---------------------------------------------------------------------- ----------- ----------- ----------- 8,974,234 8,798,626 8,865,250 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL ASSETS $53,914,024 $50,878,340 $45,118,901 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 5,103,051 $ 4,963,795 $4,297,368 Employee compensation 3,500,665 3,904,546 3,285,967 Taxes, other than income taxes 458,323 442,247 309,420 Income taxes payable 216,326 247,354 349,698 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES 9,278,365 9,557,942 8,242,453 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL LIABILITIES 9,278,365 9,557,942 8,242,453 SHAREHOLDERS' EQUITY Common shares, $.10 par value 1,164,490 1,149,573 1,125,287 Additional paid-in capital 10,642,462 9,724,365 8,454,374 Retained earnings 32,970,026 30,400,007 27,235,049 Equity adjustment from translation (141,319) 46,453 61,738 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 44,635,659 41,320,398 36,876,448 - ---------------------------------------------------------------------- ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $53,914,024 $50,878,340 $45,118,901 =========== =========== ===========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED SEPTEMBER 30 1997 1996 - -------------------------------------------------------------------------------------------------------- ------------ ------------ OPERATING ACTIVITIES Net earnings $ 3,252,870 $ 3,482,246 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable 11,066 994 Depreciation and amortization of property, plant and equipment 929,055 903,903 Amortization of goodwill 112,567 189,965 Gain on sale of assets (16,539) -- Changes in operating assets and liabilities: Accounts receivable 621,454 3,350,954 Prepaid expenses (104,993) (249,347) Inventories (812,529) (1,505,962) Other assets (681,386) 145,568 Accounts payable and accrued expenses (973,356) (566,035) Employee compensation payable (468,483) 167,550 Taxes, other than income taxes 16,076 3,193 Current income taxes payable (31,028) (276,441) Foreign currency translation (gain) loss (196,895) 5,200 - -------------------------------------------------------------------------------------------------------- ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 1,657,879 5,651,788 - -------------------------------------------------------------------------------------------------------- ------------ ------------ INVESTING ACTIVITIES Additions to property, plant and equipment (867,343) (1,375,819) Proceeds from disposal of property, plant and equipment 17,602 -- Purchase of companies, net of cash acquired (1,452,208) -- - -------------------------------------------------------------------------------------------------------- ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (2,301,949) (1,375,819) - -------------------------------------------------------------------------------------------------------- ------------ ------------ FINANCING ACTIVITIES Proceeds from stock options exercised 945,417 219,732 Dividends paid (577,822) (449,233) Purchases of common stock (117,432) -- - -------------------------------------------------------------------------------------------------------- ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 250,163 (229,501) - -------------------------------------------------------------------------------------------------------- ------------ ------------ Effect of exchange rate changes on cash and cash equivalents 28,323 27,062 - -------------------------------------------------------------------------------------------------------- ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (365,584) 4,073,530 - -------------------------------------------------------------------------------------------------------- ------------ ------------ Cash and cash equivalents at beginning of year 7,694,998 688,055 - -------------------------------------------------------------------------------------------------------- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF SIX MONTH PERIOD $ 7,329,414 $ 4,761,585 ============ ============
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1997 (Unaudited) Note 1. Basis of Presentation The information included in the accompanying interim financial statements is unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year. Note 2. Earnings Per Share See Exhibit 11, Computation of Per Share Earnings, on page 12 of this document. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the three-month period ended September 30, 1997, were $20,686,000 which represents an increase of 7 percent from $19,315,000 for the same period last year. For the first six months of fiscal 1998, the Company's net sales were $39,976,000, up 3 percent from $38,812,000, for the same six-month period a year ago. Sales of products for the Safety, Comfort, and Health of People decreased 1.5 percent and accounted for 66 percent of the Company's total business during the second quarter, compared to 72 percent for the same quarter a year ago. For the six months ended September 30, 1997, sales of Safety, Comfort, and Health products decreased 3.5 percent and represented 65 percent of total sales compared with 69 percent for last year's first half. This area accounted for 67 percent of the Company's business in fiscal 1997, ended March 31, 1997. While sales of commercial product lines in this market area have continued to increase during the second quarter and six-month periods of fiscal 1998, a decrease in sales of military sales of the Company's PORTACOUNT(R) respirator fit testers caused the year-to-year comparison to show a small decrease. The major difference is due to a contract for these devices from the German Army which was shipped during the first three quarters of fiscal 1997. During the first six months of fiscal 1998, a total of $4.2 million of military PORTACOUNT fit testers were shipped compared with $6.8 million for the prior year. Without the military PORTACOUNT fit tester sales, the Safety, Comfort, and Health market area had about a 14 percent sales increase for the second quarter and about 9 percent for the six months of fiscal 1998 compared with the prior year. Sales of products for Productivity and Quality Improvement increased 29 percent and were at 34 percent of total sales for the fiscal 1998 second quarter compared with 28 percent a year ago. For the six months ended September 30, 1997, sales of Productivity and Quality Improvement products increased 18 percent, making up 35 percent of total sales compared with 31 percent for last year's first half. For fiscal 1997, ended March 31, 1997, this category accounted for 33 percent of the Company's business. A portion of the sales increase in this area came from two small acquisitions--Zimmer GmbH in Germany made October 30, 1996, and Target Systems, Incorporated, made July 15, 1997. Without these acquisitions, sales of products for Productivity and Quality Improvement increased 18 percent for the second quarter and 10 percent for the six-month period of fiscal 1998 compared with fiscal 1997. The remainder of the sales increases are mainly attributable to the Company's line of LaserSpeed(R) noncontact, industrial process instrumentation. Sales to U.S. and state government agencies including defense, comprised about 28 percent of the Company's net sales for the quarter as compared to 26 percent for the same quarter last year. For the six months ended September 30, 1997 and 1996, sales to the U.S. and state government agencies were at 25 percent and 23 percent, respectively. These changes in the percentage of governmental sales is within the range of normal fluctuations that can occur from quarter-to-quarter. The second half of fiscal 1998 should show governmental sales to be at a similar, or slightly lower, percentage compared with the first six months. Since sales to government agencies represent a significant portion of the Company's sales, it is important to consider the potential effects of changes in government spending. Due to the Company's diverse line of products, sales usually occur in a wide range of U.S. and state government agencies, so total government sales during the past several years have been quite stable as a percentage of total sales. However, shifts have occurred because of changes from quarter-to-quarter and year-to-year in shipments under contracts with the U.S. military agencies for the Company's PORTACOUNT(R) respirator fit testers. During the second quarter, backlog of orders stayed almost even at $23.0 million at September 30, 1997, compared with $23.1 million at June 30, 1997, but below the backlog of $25.9 million at September 30, 1996. Order bookings were stronger across most of the Company's product lines at $20.4 million in the second quarter ended September 30, 1997 compared to the $17.4 million in the first quarter ended June 30, 1997. The lower backlog compared to a year ago is mainly due to shipments on a major contract for PORTACOUNT fit testers with the German Army which was still in backlog a year ago. Gross profit for the second quarter ended September 30, 1997, was 56.4 percent of net sales compared with the 56.1 percent gross profit margin in the second quarter last year. Six-month gross profit margin was 55.7 percent this year compared to 56.2 percent a year ago. These gross profit margin percentages for the second quarter and first six months fell within what is considered to be a normal range for TSI's business. Research and product development expenses as a percentage of net sales were 14.2 percent for the second quarter and 14.3 percent for the six-month period ended September 30, 1997, compared to 14.4 percent and 13.6 percent of net sales, respectively, for the same periods last year. Actual research and product development spending was up about 5 percent in the second quarter and 8 percent in the first six months. The Company continues its commitment to growth through development of new technologies and products. For all of fiscal 1998, research and development expenses are expected to continue near the Company's historical range of 12 to 14 percent of sales. Selling expenses were 22.0 percent of net sales for the second quarter compared to 21.7 percent for the year earlier period. For the first six months of fiscal 1998, selling expenses were 22.3 percent compared with 21.8 percent for the same period a year ago. The differences between periods as a percentage of sales are considered to be within the range of normal fluctuation. Administrative expenses were 8.0 percent and 7.9 percent of net sales for the three and six-month periods ended September 30, 1997, respectively. For the same periods ended September 30, 1996, administrative expenses were 7.7 and 7.5 percent of net sales. The Company expects administrative costs to continue in a normal operating range of 7 to 9 percent of net sales through the remainder of fiscal 1998. Other income was $190,000 in the second quarter and $486,000 in the first six months of fiscal 1998 compared with $108,000 and $173,000, respectively, for the same periods in fiscal 1997. The increase for the second quarter of the current fiscal year is due to higher interest income due to higher cash balances, along with fluctuations due to foreign currency transactions. The provision for income taxes was at the rate of 35 percent of pre-tax earnings for the second quarter and six month periods of both fiscal 1998 and 1997. Liquidity and Capital Resources Cash and cash equivalents remained at about the same level, being at $7,329,000 on September 30, 1997, compared with $7,695,000 at March 31, 1997. The increase attributable to increased net earnings was more than offset by increases in inventory, property, plant, and equipment and other assets, decreases in accruals, and cash required for the acquisition of another company. The ratio of current assets to current liabilities was 3.9 as of September 30, 1997, compared to 3.7 as of March 31, 1997. Working capital increased $5,485,000 to $27,132,000 at the end of the second quarter of fiscal 1998, compared to $21,647,000 at the end of fiscal 1997. Management believes internally generated funds and short-term borrowings on existing credit lines will provide adequate resources for supporting operations during the remainder of fiscal 1998. Forward-Looking Statements The Company believes that this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to certain risks and uncertainties. Forward-looking statements represent the Company's expectations or beliefs concerning future events, including the following: any statements regarding future sales and gross profit percentages, any statements regarding the continuation of historical trends, any statements regarding the sufficiency of the Company's cash balances and cash generated from operating and financing activities for the Company's future liquidity and capital resource needs, any statements regarding the effect of regulatory changes, the success of development and enhancement of the Company's products, the adequacy of the Company's facilities, potential acquisitions, and any statements regarding the future of the instrumentation industry and the various parts of the instrumentation markets in which the Company conducts its business. The Company cautions that any forward-looking statements made by the Company in this report or in other announcements made by the Company are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitations, the factors set forth on Exhibit 99 to the Company's report on Form 10K for the fiscal year ended March 31, 1997. PART II. OTHER INFORMATION Item 6. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K have been filed by the Registrant during the quarter for which this report is being filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. Registrant: TSI Incorporated Date: November 12, 1997 By: --------------------------------- James E. Doubles President & CEO Date: November 12, 1997 By: --------------------------------- Lowell D. Nystrom Vice President &CFO EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 TSI Incorporated Computation of Per Share Earnings
Three Months Ended Six Months Ended June 30, 1997 September 30, 1997 ------------------------- ------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Primary - ------- Average shares outstanding 11,529,903 11,372,186 11,512,226 11,229,319 Net effect of dilutive stock options, based on the treasury stock method using average market price 274,004 434,371 285,099 444,637 ----------- ----------- ----------- ----------- Total 11,803,907 11,806,557 11,797,325 11,673,956 Net Earnings $ 1,770,616 $ 1,609,300 $ 3,252,870 $ 3,482,246 Primary per share amounts $ .15 $ .14 $ .28 $ .30 Fully Diluted - ------------- Average shares 11,529,903 11,372,186 11,512,226 11,229,319 Net effect of dilutive stock options, based on the treasury stock method using the period-end market price, if higher than the average market price 271,115 438,053 285,487 446,748 ----------- ----------- ----------- ----------- Total 11,801,018 11,810,239 11,797,713 11,676,067 Net Earnings $ 1,770,616 $ 1,609,300 $ 3,252,870 $ 3,482,246 Fully diluted per share amounts $ .15 $ .14 $ .28 $ .30
EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS MAR-31-1997 JUL-01-1997 SEP-30-1997 7,329,414 0 13,934,968 477,624 14,667,945 36,409,951 23,594,322 14,620,088 53,914,024 9,278,365 0 0 0 1,164,490 43,471,169 53,914,024 20,685,942 20,685,942 9,015,870 9,136,839 (190,383) 0 0 2,723,616 953,000 1,770,616 0 0 0 1,770,616 .15 .15
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